International News 21/03

March 21, 2024 No. 45

The Bank of Japan has ceased its negative interest rate policy.

The Bank of Japan (BoJ) has decided to end its negative interest rate policy, which has been in place since 2016. This marks a significant shift from its massive stimulus program. It is the first interest rate hike in Japan since 2007. BOJ Governor Kazuo Ueda is expected to hold a press conference to explain the decision. The negative interest rate policy involved imposing a 0.1% charge on a small amount of financial institutions' excess reserves held at the central bank. As inflation has exceeded the BOJ's 2% target for over a year, many market participants have anticipated the central bank's exit from its ultra-loose monetary policy in March or April.

As expected, Australia's central bank has kept the interest rate at 4.35%.

The Reserve Bank of Australia (RBA) has decided to maintain the interest rate at 4.35% for the third consecutive meeting. The RBA also reduced its tightening bias, indicating increased confidence in inflation returning to its target. Despite the slowing economy and low inflation, the RBA stated that it was not ruling out any policy and that the best path for interest rates to achieve the target remains uncertain. During the post-meeting briefing, Governor Michelle Bullock emphasised the need for caution and preparedness to act if risks start to move in any direction. She did not state whether the policy had shifted to neutral and pushed back on rate cuts in the near term. This decision aligns with market expectations, as inflation is at its lowest in two years and economic growth is slowing.

Oil prices rose 2% to the highest level amidst a flood of positive sentiment.

On Monday, oil prices rose by around 2%, reaching their highest level in four months. This increase was due to positive factors such as a decrease in crude exports from Iraq and Saudi Arabia, as well as indications of stronger demand and economic growth in China and the United States. Brent futures increased by 1.8% to $86.89 per barrel, while US West Texas Intermediate (WTI) crude oil rose by 2.1% to $82.72. These gains pushed both benchmarks into overbought territory. Brent closed at its highest level since October 31, 2023, and WTI reached its highest level since October 27, 2023. Additionally, US gasoline futures also rose to their highest level since August 31, 2023. On the supply side, Iraq, the second-largest producer within OPEC, announced a reduction in crude exports to compensate for exceeding its OPEC+ quota.


Ruble strengthens following Putin's election victory

Following President Vladimir Putin's victory in the recent Russian election, the Russian ruble has rebounded from a three-month low against the euro and yuan. Putin secured a record-breaking 87.8% of the vote, surpassing his previous record of 77% in the 2018 election. This result makes Putin the longest-serving president in Russian history, overtaking Josef Stalin. The market's response to Putin's victory has been positive. This is evident from the strengthening of the ruble against the US dollar, euro, and yuan. Despite the ruble's recent weakness before the election, its impact on the Russian stock market is expected to be limited. Investors have found the election result to be expected and reassuring. As a result, no major capital flows are putting pressure on the market due to Russia's isolation. Analysts suggest that the market may receive a post-election boost.